Instant View: Confidence vote topples Romania government

April 27, 2012|Reuters

BUCHAREST (Reuters) - Romania's government lost a confidence vote on Friday just two months after it took office, raising the prospect of months of political turmoil and questions over its austerity programme.

Here is some reaction to the news:

MARKET REACTION

Romania's leu hit an all-time low at 4.4010 per euro after the news and traded 0.4 percent lower on the day.

DAN BUCSA, UNICREDIT TIRIAC BANK

"Despite recent defections by MPs from the governing coalition, today's result was not expected and the RON depreciated above 4.39 RON/EUR following the news. We expect higher FX volatility to follow.

"The (central bank) could defend 4.4 RON/EUR, but prolonged political uncertainty could lead to temporary RON depreciation above that threshold."

"Since USL has a very thin majority in Parliament, political turmoil could follow. Nevertheless, Romania's agreement with the IMF is not threatened, since all parliamentary parties support the loan deal. This means that there is limited scope for fiscal slippages in 2012, when the budget deficit target is a very ambitious 1.9 percent of GDP."

"After the vote, the NBR could end the easing cycle earlier than planned. If a new Government will emerge before 2 May, a final cut to 5 percent is still on cards."

MIRCEA MARIAN, POLITICAL COMMENTATOR

"The most likely version is that (President) Traian Basescu will nominate Victor Ponta as prime minister. A less likely version is Basescu giving another mandate to Ungureanu."

"I think Basescu will make the announcement of the nominated prime minister tonight or tomorrow. USL has already prepared a government and could appear in front of parliament towards the end of next week."

DAN BUCSA, CHIEF ECONOMIST AT UNICREDIT TIRIAC BANK

"Despite recent defections by MPs from the governing coalition, today's result was not expected and the RON depreciated above 4.39 RON/EUR following the news. We expect higher FX volatility to follow.

"The NBR could defend 4.4 RON/EUR, but prolonged political uncertainty could lead to temporary RON depreciation above that threshold."

"The leader of the Social Democrat Party (PSD), senior opposition party and co-leader of USL, declared that early elections are not an option since the process would take two months, too long given the difficult economic situation."

"Since USL has a very thin majority in Parliament, political turmoil could follow. Nevertheless, Romania's agreement with the IMF is not threatened, since all parliamentary parties support the loan deal. This means that there is limited scope for fiscal slippages in 2012, when the budget deficit target is a very ambitious 1.9% of GDP."

"After the vote, the NBR could end the easing cycle earlier than planned. If a new Government will emerge before 2 May, a final cut to 5% is still on cards."

COMMENTS

KOON CHOW, STRATEGIST, BARCLAYS CAPITAL

"It is certainly not a good thing given that it means people will be looking for no improvement on economic policy, no re-engagement of the IMF.

"The end result seems to ... echo what we have been seeing in neighboring countries in terms of a popular move away from the parties that are pushing for austerity.

"The things we are saying for those countries that are facing transition have to apply. Economies that have less of a challenge to stabilize themselves should be at the better end of the spectrum."

MIHAI PATRULESCU, ECONOMIST AT BANCPOST

"Romania's monetary policy should remain independent of what happens in the government. And the (opposition) USL has said will support the IMF deal.

"I don't think major financial pressure should follow the government fall. Most likely the central bank will continue the easing cycle.

"As the result was unexpected the leu depreciated against the euro, but the volatility will be short term. It all depends if Basescu will replace the government soon or wait."

OPPOSITION LEADER VICTOR PONTA

"In spite of an abusive system that uses any weapon, dirty and illegal, sometimes justice is done. Today justice was done."

"USL is willing to take responsibility to govern until elections."

PETER ATTARD MONTALTO, NOMURA

"This will arouse worry among investors about policy direction.

"Of course, the country is bound by the IMF programme but ... there will be perhaps some changes of stance."